Official interest rates are set to stay on hold for a long period ahead, with the head of the Reserve Bank saying he wants to see much higher wages growth and inflation before increasing the cost of money.

Governor Philip Lowe, in an address in Melbourne today, said while the next move in rates was more likely to be up than down there was little chance of that move occurring any time soon.

“Any increase in interest rates, however, still looks to be some time away,” he said.

“The (RBA) board will want to have reasonable confidence that inflation is picking up to be consistent with the medium-term target and that slack in the labour market is lessening.

“At this stage, a sustained pick-up in inflation to around the midpoint of the target range is likely to require faster wages growth than we are currently experiencing.”

The Reserve has held the official cash rate at 1.5 per cent since August 2016.

Wages growth is still around record lows while inflation, at 1.9 per cent, is still outside the Reserve Bank’s target band of between 2 per cent and 3 per cent.

Dr Lowe said while there were some signs of wages picking up in certain industries this was not widespread.

For interest rates to be increased, he said, the economy would have to see “people’s incomes growing more quickly than they are now”.

He said he would prefer to see wages growing at around 3 per cent per annum rather than the current 2 per cent.

“There are reasonable grounds to expect that this increase in wages growth will occur. But for the reasons I have spoken about today, this increase is likely to be only gradual,” he said.